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Edited version of your written advice

Authorisation Number: 1051253571342

Date of advice: 20 July 2017

Ruling

Subject: Goods and services tax (GST) and medical alert devices

Questions 1 to 4

Is GST payable on your sale of product X (a medical alert device) and accessories?

Answer

No.

Question 5

Is GST payable on your importation of product X and accessories?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You import and sell a Personal Emergency Response System (PERS) – a medical alert device. You will be importing a new model PERS. The new model PERS is called product X. Product X has a button for notifying emergency contacts that the user requires medical help or assistance.

There are a number of accessories specifically designed to be used in connection with product X. You will sell accessories together with product X. You will also sell accessories on their own and combinations of accessories.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 13-5(1)

A New Tax System (Goods and Services Tax) Act 1999 section 13-10

A New Tax System (Goods and Services Tax) Act 1999 section 38-45

Reasons for decisions

Questions 1 to 4

Summary

GST is not payable on your sale of these products because they are GST-free supplies of a medical aid or appliance under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and GST-free supplies of spare parts under subsection 38-45(2) of the GST Act.

Detailed reasoning

GST is payable by you on your taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

      (a) you make the supply for *consideration; and

      (b) the supply is made in the course or furtherance of an *enterprise that

      you *carry on; and

      (c) the supply is *connected with the indirect tax zone; and

      (d) you are *registered, or *required to be registered.

    However, the supply is not a *taxable supply to the extent that it is *GST-free

    or *input taxed.

(*Denotes a term defined in the GST Act)

The indirect tax zone means Australia (within the meaning of the Income Tax Assessment Act 1997), but does not include any of the following:

    (a) the external Territories

    (b) an offshore area for the purpose of the Offshore Petroleum and Greenhouse Gas Storage Act 2006;

    (c) the Joint Petroleum Development Area (within the meaning of the Petroleum (Timor Sea Treaty) Act 2003);

other than an installation (within the meaning of the Customs Act 1901) that is deemed by section 5C of the Customs Act 1901 to be part of Australia and that is located in an offshore area or the Joint Development Area.

A supply of a medical aid or appliance is GST-free under section 38-45(1) of the GST Act if certain requirements are met. It states:

A supply is GST-free if:

    (a) it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations; and

    (b) the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.

Item 33 in the table in Schedule 3 to the GST Act (Item 33) specifies 'medical alert’ devices.

ATO Interpretative Decision ATO ID 2001/509 Goods and Services Tax GST and the installation of medical alert device components states:

    Item 33 in the table in Schedule 3 (Item 33) specifies 'medical alert' devices. It is considered that a medical alert device is a device that is designed for the purpose of alerting medical/caring personnel or an ambulance service that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment. An emergency call system falls within the meaning of Item 33.

Product X and its accessories are an emergency call system. They are a medical alert device, which is covered by item 33.

The emergency call system is specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Therefore, the sale of this system is GST-free under subsection 38-45(1) of the GST Act. Hence, GST is not payable on the sale of this system.

Under subsection 38-45(2) of the GST Act, the supply of a spare part is GST-free if the spare part is:

    ·supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act, and

    ·specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.

ATO ID ATO Interpretative Decision ATO ID 2005/4 Goods and Services Tax GST and mattress as spare part for hospital bed considers whether a supply of a mattress specifically designed to fit hospital type beds is a GST-free supply of a spare part under subsection 38-45(2) of the GST Act.

It states:

    The entity's mattresses have a PVC cover consisting of medical grade vinyl or polyurethane to prevent penetration of fluids. The mattresses are specifically designed to fit 'hospital-type beds' listed at Item 61, the supplies of which are GST-free under subsection 38-45(1) of the GST Act. Therefore, the entity is supplying a mattress that is specifically designed for a GST-free medical aid or appliance. However, the entity's supply will only be GST-free if the mattress is a 'spare part' for a hospital-type bed.

    The term 'spare part' is not defined in the GST Act. 'Spare part' is defined in The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd NSW, as a 'part which replaces a faulty, worn or broken part of a machine'. Accordingly, a part need not actually be replacing something which is faulty, worn or broken to qualify as a spare part, but just be capable of doing so. Therefore, it needs to be determined if a mattress is 'part' of a bed.

    Neither the term 'hospital-type bed' nor the word 'bed' are defined in the GST Act. The Macquarie Dictionary , 1997, 3rd edition, The Macquarie Library Pty Ltd NSW, defines the word 'bed' to mean, amongst other things, ' 1. a piece of furniture upon which or within which a person sleeps. 2. the mattress and bedclothes together with the bedstead. 3. the bedstead alone. 4 ...' Therefore, 'bed' could mean the frame and mattress or the frame only.

    The context within which the word 'bed' is used in Item 61 does not suggest that 'bed' should be given its more restrictive meaning. Therefore, the word 'bed' as used in Item 61 refers to both the bed frame and its mattress. Accordingly, a mattress forms part of a bed for the purposes of Item 61.

    The entity is supplying a mattress that is capable of replacing an existing hospital bed mattress that is worn, faulty or broken. Therefore, the mattress supplied by the entity is a 'spare part' for a hospital bed.

    Therefore, the entity is making a GST-free supply of a spare part under subsection 38-45(2) of the GST Act when it supplies a hospital bed mattress.

The accessories in your case are designed to be used as parts of a medical alert device and the sale of the medical alert device is GST-free under subsection 38-45(1) of the GST Act.

The accessories are capable of replacing worn, faulty or broken parts of a medical alert device. Therefore, the supply of these accessories is a supply of spare parts for a medical aid or appliance (a medical alert device), the supply of which is GST-free under subsection 38-45(1) of the GST Act.

Therefore, your supplies of accessories are GST-free supplies of spare parts under subsection 38-45(2) of the GST Act. Hence, GST is not payable on your supplies of accessories.

Question 5

GST is payable on taxable importations.

Subsection 13-5(1) of the GST Act states:

You make a taxable importation if:

      (a) goods are imported; and

      (b) you enter the goods for home consumption (within the

      meaning of the Customs Act 1901).

    However, the importation is not a taxable importation to the extent

    that is it a *non-taxable importation.

Section 13-10 of the GST Act states:

An importation is a non-taxable importation if:

      (a) it is a non-taxable importation under Part 3-2; or

      (b) it would have been a supply that was *GST-free or *input

      taxed if it had been a supply.

Paragraph 251 of Goods and Services Tax Ruling GSTR 2003/15 states:

    251. In determining whether an importation, if it had been a supply, would have been GST-free or input taxed, the Commissioner considers that you need to hypothesise that the importation were a supply to the importer. If this hypothetical supply to the importer would have satisfied one of the exemptions in Chapter 3 of the Act, the importation is non-taxable.

If the importation of the products in question were instead supplies to the importer – you, they would have been GST-free supplies under section 38-45 of the GST Act. Therefore, in accordance with paragraph 13-10(b) of the GST Act, the importation of these products are non-taxable importations for GST purposes. Hence, in accordance with subsection 13-5(1) of the GST Act, GST is not payable on the importation of these products.